British manufacturing output rose by its biggest amount in nearly a year in March, official data showed on Thursday, supporting the growing market view that the next move in UK interest rates will be up.
The Office for National Statistics said manufacturing output rose 0.7 percent in March, after a 0.1 percent fall in February. That was more than three times higher than analysts' expectations and the strongest rise since April 2005.
Factory output, which the ONS said was lifted by transport equipment and production of televisions in the run up to the World Cup soccer tournament, rose by 1.1 percent on a year ago, also much stronger than expected.
British interest rate futures contracts fell sharply and the pound jumped against the dollar and the euro on expectations the Bank of England's next move would be to raise borrowing costs from their current 4.5 percent.
"Although today's data surprised us and the consensus on the upside, it is unlikely to have a large impact on the preliminary estimate of Q1 GDP growth," said Amit Kara, economist at UBS.
The ONS said the monthly rise in manufacturing output was driven by a strong pick-up in the production of transport equipment as well as electricals, like television sets.
The broader measure of industrial production, which includes Britain's North Sea oil fields as well as electricity, gas and water, also rose more than expected - up 0.7 percent in March, and by 0.3 percent on the year.
Industrial production rose 0.8 percent in the January-March period, the first calendar quarterly rise since Q4 2004, and the strongest such rise since Q3 1999. That was also stronger than the 0.7 percent the ONS estimated at the end of last month in the first estimate of Q1 gross domestic product.
The ONS said the small improvement to 0.8 percent would add 0.02 percentage points to GDP growth.
Chancellor of the Exchequer Gordon Brown hailed the figures, although UK manufacturing makes up less than one-fifth of economic output.
"British growth is strong, strengthening and will strengthen even more in the months to come," Brown told parliament.